Hong Kong company formation

All you need to know about a Hong Kong Subsidiary

Hong Kong has become the natural choice of foreign investors who want to enter the Asian markets. Its low tax regime, conducive business environment, access to the mainland Chinese market and provision of 100% foreign ownership for foreign enterprises make Hong Kong an ideal destination to open subsidiary companies. This piece of writing defines the entity Hong Kong subsidiary, the eligibility criteria to incorporate, and its registration process.     

What is a Hong Kong Subsidiary?   

A Hong Kong subsidiary of a foreign registered company is a private limited company registered in Hong Kong with the foreign parent company as its shareholder. Even if a foreign parent entity wholly owns a Hong Kong subsidiary, it is still considered a local Hong Kong company which is eligible to avail the tax benefits to other local companies. The subsidiary company is a separate legal entity and has its own separate management.     

Eligibility criteria of a Hong Kong Subsidiary

The following eligibility criteria are required to be met by an entity to be considered as a Hong Kong subsidiary:     

Shareholding of the subsidiary 

A company should have a minimum of one shareholder and a maximum of 50 shareholders to be incorporated as a subsidiary in Hong Kong. Any national can become a shareholder of the subsidiary. Additionally, 100 per cent shareholding has been permitted, and a foreign company can have a wholly-owned subsidiary.

Directors in a Hong Kong subsidiary  

At least one director has to be appointed in a Hong Kong subsidiary. Such a director can be either a natural person above 18 years of age or a body corporate. Any national or a company of any residence can become a director of the subsidiary company. It must be noted that the natural person should not be bankrupt or convicted. A sole shareholder has also been permitted to act as the director.

Company Secretary

The company secretary of the subsidiary should be a person who is a local resident. Such a person can be either a natural person or a body corporate. The director and sole shareholder cannot become a company secretary.   

Local Registered Address

A subsidiary company should have a physical address registered with the Company Registrar, where all the correspondence with the subsidiary will be done from the Company Registrar’s end. The subsidiary is obligated to maintain prescribed internal documents and registers at this address. Residential spaces cannot be used as the registered address.   

Auditor 

An audited financial statement is required to be submitted by the subsidiary to the Inland Revenue Department (IRD^[1]). This makes it incumbent on the subsidiary to appoint a chartered Accountant holding a practising certificate and a member of the Hong Kong Society of Accountants.

Share capital  

The law does not prescribe either minimum or maximum share capital required for incorporating a Hong Kong subsidiary. Usually, a Hong Kong subsidiary is incorporated with an authorised share capital of 10,000 HKD with paid up capital of HKD1 per share.

Procedure for incorporating a Hong Kong Subsidiary

Choosing an appropriate and legal name for the subsidiary: 

The first step begins with choosing a suitable name for the subsidiary. The name can be in English, traditional Chinese, or a combination of Chinese and English. The selected name should not be identical to the names of existing registered companies, should not infringe on trademarks, in conflict with public interest or be offensive towards the public sentiments. A suitable name will be decided when the application is approved or rejected. The application money will not be refunded. Therefore, it is advisable that the professional services of incorporation experts like Enterslice should be taken before submitting the application.  

Documents required:

Some of the important documents required for subsidiary registration in Hong Kong include:

• Subsidiary’s AOA
• Notice to Business Registration Office
• The incorporation form covers information related to the name, registered address, business activities, directors’ details, shareholders’ liability, members’ liability, subsidiary’s share capital and shares subscribed by the subscribers.
• Passport copy and residential proof of non-resident directors and shareholders         

Obtaining name approval from Registrar:

The next step is to obtain approval from the Registrar for the subsidiary. It must be noted that approval of the subsidiary’s name does not automatically confer the right to use the name as a trademark. In order to use the name as a trademark, the name has to be registered with the Trade Marks Registry, upon whose approval the right to use the name as a trade mark will be granted to the subsidiary.       

Application for incorporation of the subsidiary:

Application for incorporation of the subsidiary can be made online or offline to the Company Registrar. The approval time is quicker in the case of online filing. If all the documents are submitted, and there are no defects in the documentation. In that case, the entire process of incorporating a Hong Kong subsidiary does not take more than one week.  

Collect incorporation certificates: 

The certificates of incorporation are issued after the completion of the incorporation process. These include the Certificate of Incorporation (CoI) and the Business Registration Certificate (BRC). The application submitted to the Company Registrar is deemed to have been made to the IRD for obtaining BRC. It is a one-stop solution where the Company Registrar and IRD issue CoI and BRC together. BRC must be obtained before commencement of the business operations or within 30 days from the commencement of business operations.  

Post-Incorporation procedures  

Obtaining CoI and BRC is not enough to commence the business operations for a subsidiary. Depending on the nature of the business operations, the promoters need to obtain other licenses and permits prescribed by the respective state departments to commence business operations in a particular business sector. This usually takes 2-8 weeks. Afterwards, a bank account should be opened in the subsidiary’s name to carry out its operations. Apart from these permits, ongoing compliances need to be met by the subsidiary to carry on the business. 

Conclusion 

No matter how smooth the registration procedure is for a Honk Kong subsidiary, there are always sector-specific licenses to be obtained and liaisoning to be done with the government authorities. This can be a daunting task. This is where the team of incorporation experts from Enterslice come to your rescue by providing you with clarity and ensuring the all-round incorporation of your Hong Kong subsidiary. If you want advice on subsidiary incorporation in Hong Kong, get on a call with incorporation experts at Enterslice.

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